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Law of the Saudi Industrial Development Fund

Under this Law, a fund named the "Saudi Industrial Development Fund" shall be established. The Fund shall have a legal personality and shall be represented by the chairman of its board of directors. The Fund's headquarters shall be in the City of Riyadh, and for the purpose of conducting its activities, it may establish branches or designate agents in other cities. The Fund shall administratively report to the Ministry of Finance and National Economy.

Article 2

Fund's Objectives

The Fund aims to promote industrial development in the Kingdom's private sector through:

1- Providing medium or long-term interest-free loans to new industrial entities established in the Kingdom.

2- Providing medium or long-term interest-free loans to existing private industrial entities for expansion of their activities, replacement of their equipment, and modernization.

3- Providing necessary economic, technical or administrative consultations to industrial entities in the Kingdom, if possible.

Article 3

Fund's Powers

The Fund shall have the powers necessary to achieve the objectives set forth in this Law. Such powers shall include entering into relevant loan contracts and other contracts and accept pledges and other types of collateral against such loans. The Fund may own, pleddge or sell all types of property, whether movable or immovable, and may borrow or incur any other obligations.

Article 4

Investment and Loan Policies

1- The government's industrial policy shall constitute the basis for the Fund's activity to promote the industrial sector in the Kingdom. To this end, the Fund shall cooperate with other relevant government agencies and entities.

2- The Fund shall conduct a comprehensive assessment of the feasibility study of the project for which funding is requested, taking into account the soundness of its management, to verify the feasibility of said project from economic, financial and technical perspectives.

3- When examining projects to be funded, the Fund shall consider whether the funding required for the whole project is reasonably calculated and whether the extent of the Fund's assistance represents a reasonable percentage of the project's total funding needs.

4- The Fund shall secure adequate financial guarantees from the owners of the industrial projects it funds. Such financial guarantees shall be proportionate to the funding provided.

5- The Fund shall monitor the execution of the industrial projects funded by it to ensure their progress according to set plans. The Fund shall also provide advice to industrial entities regarding problems and difficulties encountered by such projects. Monitoring shall be carried out by obtaining reports on such projects and conducting inspection by the Fund.

6- The Fund may not provide more than 25% of the total funding required for the project or its development.[1]

7- The Fund may not lend to cover working capital needs.

8- The term of loans provided by the Fund may not exceed fifteen years.[2]

9- The Fund shall charge reasonable fees for expenses incurred in performing its activities as determined by the Board of Directors.

10- The Fund shall set a cap for the amount of loans provided to any project.

11- The Fund may invest its surplus funds, if any, in short-term investments within the Kingdom or abroad until the need arises for such funds. The Fund shall ensure the availability of liquidity and security in such investments. Investment returrns shall be added to the Fund's revenues.

Article 5

Fund's Capital

The Fund's capital shall be 500 million riyals to be paid by the Ministry of Finance and National Economy in installments as agreed upon with the Fund. Such capital may be increased pursuant to a resolution by the Council of Ministers upon a recommendation by the Minister of Finance and National Economy.[3]

Article 6

Loans granted by the Fund shall be classified as Public Treasury funds in terms of rights, benefits and guarantees, and shall be collected, as other state funds, in accordance with the rules governing the collection of state funds.

Article 7

Fund's Board of Directors

The Fund shall have a board of directors composed of five members including the chairman, appointed by the Council of Ministers upon the recommendation of the Minister of Finance and National Economy, for a term not exceeding four years, renewable for additional terms. The Council of Ministers shall determine remuneration of the chairman and board members. The board shall be in charge of directing the Fund's activities and general policy.

Article 8

Board Meetings

The board shall convene, when necessary, upon a call by its chairman, and shall elect from among its members a deputy chairman to assist the chairman in his presence and act on his behalf in his absence. Board meetings shall be deemed valid only if attended by majority of members. Board decisions shall be passed by the majority of attending members. In case of a tie, the meeting chairman shall have the casting vote.

Article 9

Fund's Director General and his Deputy

The Fund shall have a director general and a deputy director general. The director general shall be responsible before the board of directors for the implementation and promotion of the Fund's policy, regulations and board decisions. The director general shall attend board meetings, take part in board deliberations and sign meeting minutes, without having the right to vote.

Article 10

Fund's Regulations

The Fund's board of directors shall issue the regulations necessary for its management.

Article 11

The Fund may enter into agreements with one or more experienced and reputable institutions to provide the Fund with technical and professional services, subject to agreed-upon conditions, and for a specific number of years, renewable at the board's discretion. Such services shall include naming a director general for the Fund from the date the Fund commences its activity and for the period agreed upon by the board and the institution.

Article 12

Fund's Auditor

The Fund's board of directors shall appoint one or more experienced auditors to perform standard auditing in addition to any internal auditing determined by the Fund's regulations or board of directors. The Fund's board of directors shall determine the auditor's fees, term, and reappointment.

Article 13

Fiscal Year

The Fund's fiscal year shall be the State's fiscal year.

Article 14

Board of Directors' Report

The Fund's board of directors shall submit a report to the Minister of Finance and National Economy within the four months following the end of the Fund's fiscal year. The report shall include the activities and accounts certified by chartered auditors. The Minster shall submit the report along with his remarks to the Council of Ministers for consideration, approval, or instructions. Upon approval, the report shall be published in the Official Gazette.

​

Amendments to the Law

Ref: M/71

Date: 14/12/1394H

With the Help of Allah;

We, Faisal ibn Abdulaziz Al Saud,

King of the Kingdom of Saudi Arabia,

Upon perusal of Articles 19 and 20 of the Law of the Council of Ministers issued by Royal Decree No. 38 dated 22/10/1377H;

Upon perusal of Paragraph 6 of Article 4 of the Law of the Saudi Industrial Development Fundissued by Royal Decree No. M/2 dated 26/2/1394H;

Seeking to support the industrial development of the private sector of the Kingdom's economy by increasing the amount of loans for industrial development;

And upon perusal of the Council of Minister's Resolution No. 2002, dated 3-4/12/1394H

Have decreed as follows:

First: Paragraph 6 or Article 4 of the Law of the Saudi Industrial Development Fund issued by Royal Decree No. M/2 dated 26/2/1394H shall be amended to read as follows:

"The Fund may not provide more than 50% of the total funding required for the project or its development"

Second: The Deputy Prime Minister and the Minister of Finance and National Economy shall implement this Decree.

Resolution No. 2002 dated 3-4/12/1394H

The Council of Ministers,

Upon perusal of letter No. 7068 dated 3/12/1394H submitted by the Minister of State for Finance and National Economy Affairs, referring to Royal Decree No. M/2 dated 22/2/1394H approving the Law of the Saudi Industrial Development Fund, which stipulates in Paragraph 6 of Article 4 that: "The Fund may not provide more than 25% of the total funding required for the project or its development."

And upon the Minister's statement that the Fund's Board of Directors, in light of the fact that the Kingdom is at the early stages of industrialization, especially in the private sector, and that it is not possible for industrial project entrepreneurs to obtain the sufficient funding necessary to establish or develop projects, found that Paragraph 6 of Article 4 of the Law of the Saudi Industrial Development Fund - which stipulates that the funding provided by the Fund may not exceed 25% of the total funding required for the project or its development - limits the support rendered to existing or potential project entrepreneurs, and the Fund's Board of Directors has realized that such entrepreneurs are unable to cover the remaining resources necessary for projects or their development which led the Board to propose amendment of said provision by raising the limit of the financing that may be provided by the Fund to 50% of the total funding required by the project or its development.

Whereas the Ministry of Finance and National Economy supports this proposal so as to provide an opportunity for developing and promoting the Kingdom's industrial sector, the Ministry proposes amending Paragraph 6 of Article 4 of the The Law of the Saudi Industrial Development Fund to read as follows:

"The Fund may not provide more than 50% of the total funding required for the project or its development"

Resolves as follows:

1- Approve amendment of Paragraph 6 of Article 4 of the Law of the Saudi Industrial Development Fund to read as follows:

"The Fund may not provide more than 50% of the total funding required for the project or its development"

2- A Royal Decree is drafted to this effect (attached herewith).

Second Deputy Prime Minister

Royal Decree No. M/81 dated 2/11/1395H

With the Help of Allah;

We, Khaled ibn Abdulaziz Al Saud,

King of the Kingdom of Saudi Arabia,

Upon perusal of Articles 18 and 38 of Law of the Council of Ministers, issued by Royal Decree No. 38 dated 22/10/1377H.

Upon perusal of Clause 11 of Royal Decree No. M/47 dated 30/06/1395H.

And upon perusal of Council of Ministers' Resolution No. 1599 dated 13/11/1395H

Decrees as follows:

First: Transfer of 2,500,000,000 (two thousand five hundred million riyals) from the State's general reserve to Chapter 38 (Subsidies) to increase the capital of the Saudi Industrial Development Fund.

Second: The Deputy Prime Minister and Minister of Finance and National Economy shall implement this Decree.

Resolution No. 1569 dated 12/11/1395H

The Council of Ministers,

Upon perusal of letter No. 7565/15 dated 6/11/1395H submitted by the Minister of Finance and National Economy, which states that the capital of the Saudi Industrial Development Fund under its Law amounts to 500 million riyals and that Article 5 of its Law stipulates that the Fund's capital may be increased pursuant to a resolution by the Council of Ministers, upon a recommendation by the Minister of Finance and National Economy. And whereas the Fund commenced operations on 21/8/1394H and the aggregate amount of the Fund's commitments has reached 302 million riyals and that the Fund is expected in the near future to conclude industrial loan agreements the total of which may amount to 257 million riyals, and that the Fund is currently reviewing projects amounting to 941 million riyals, and hence, the Fund's commitments will exceed its capital, and based on the decision of the Fund's Board of Directors communicated to this Ministry in letter No. 850 dated 25/9/1395H, the Minister requests the consideration of increasing the Fund's capital by 2,500,000,000 riyals to reach a total capital of 3,000,000,000 riyals.

Resolves as follows:

1- Increasing the Fund's capital by 2,500,000,000 (two thousand five hundred million riyals) to become 3,000,000,000 (three thousand million riyals). This amount shall be taken from the State's general reserve and added to Chapter 38 (Subsidies).

2- A Royal Decree is drafted to this effect (attached herewith).

Deputy Prime Minister

Ref: M/59

Date: 16/10/1432H

With the Help of Allah;

We, Abdullah bin Abdulaziz Al Saud,

King of the Kingdom of Saudi Arabia,

Pursuant to Article 70 of the Basic Law of Governance issued by Royal Order No. A/90 dated 27/08/1412H.

Pursuant to Article 20 of the Law of the Council of Ministers issued by Royal Order No. A/13 dated 3/3/1414H.

Pursuant to Article 18 of the Law of the Shura Council issued by Royal Order No. A/91 dated 27/8/1412H.

And upon perusal of Shura Council Resolution No. 108/54 dated 17/11/1431H

and Council of Ministers' Resolution No. 296 dated 14/10/1432H,

Have decreed as follows:

First: Approval of the amendment of Paragraphs 6 and 8 of Article 4 of the the Law of the Saudi Industrial Development Fund issued by Royal Decree No. M/3 dated 26/2/1394H to read as follows:

"6- The Fund may not provide more than 50% of the funding required for the project or its development, and it may increase this percentage to 75% in less developed regions and cities."

"8- The loans provided by the Fund shall be repayed within a period not exceeding 15 years, and the Fund may extend such period to 20 years in less developed regions or cities."

Second: The Deputy Prime Minister, Ministers, and heads of agencies concerned, each within their jurisdiction, shall implement this Decree.

Abdullah ibn Abdulaziz

Resolution No.: 128

Date: 26/4/1433H

The Council of Ministers,

Upon perusal of the casefile submitted by the Royal Court via telegrams No. 20436/B dated 5/8/1432H and No. 43114 dated 2/10/1432H, which include the Minister of Finance's letters No. 7117 dated 20/07/1432H and No. 8383 dated 6/9/1432H regarding the opinion of the Saudi Industrial Development Fund on Shura Council Resolution No. 22/23 dated 20/5/1432H pertaining to the Fund's annual report for the fiscal year 1430/1431H;

Upon perusal of the Law of the Saudi Industrial Development Fund issued by Royal Decree No. M/3 dated 26/02/1394H;

Upon perusal of Minutes No. 55 dated 26/1/1433H of the Bureau of Experts at the Council of Ministers;

Upon consideration of Shura Council Resolution No. 22/23 dated 20/5/1432H;

And upon perusal of the General Committee of the Council of Ministers' Recommendation No. 181 dated 21/03/1433H,

Resolves as follows:

Transferring the deposit and loan of the Ministry of Finance as addressed by Royal Decree No. 4512/MB dated 1/6/1431H in the amount of 10 billion riyals to the capital of the Saudi Industrial Development Fund, and providing the Fund with an additional 10 billion riyals from the State Budge to raise the total of the Fund's capital to 40 billion riyals.

Prime Minister

[1] This Paragraph was amended pursuant to Royal Decree No. M/71 dated 14/12/1394H. It was later amended pursuant to Royal Decree No. M/59 dated 16/10/1432H.

[2] This Paragraph was amended pursuant to Royal Decree No. M/59 dated 16/10/1432H.

[3] The Fund's captial was increased serveral times. The last capital increase was made pursuant to Royal Decree No. M/81 dated 20/11/1395H. 440 dated 20/10/1437H.